Fed Officials Continue to Share Their Views on Interest Rates
Central banks' interest rate policies continue to hold significant importance on the global economic agenda. Officials from central banks in the US, Europe, and the UK have shared their strategies regarding interest rates and inflation targets. As changing economic conditions and uncertainties arise, the effects of these decisions on global markets are being closely monitored.
Cook: “Economic slowdown and disinflation are paving the way for rate cuts” Lisa Cook, a member of the US Federal Reserve Board, noted that inflation in the US has remained confined to the housing sector, highlighting that inflation continues to decline in light of wage and employment market slowdowns. Cook pointed out that under these conditions, it may be appropriate to lower interest rates. She stated that disinflationary processes are ongoing and expressed that the labor market is gradually cooling. Cook indicated that moving the policy rate to a more neutral level over time would likely be appropriate.
Cook also mentioned that the magnitude and timing of rate cuts would depend on incoming data, adding that the Fed may accelerate or pause these cuts if the labor market weakens or inflation becomes stickier than expected. With continued economic expansion and the solid structure of the labor market, Cook projected that inflation could drop to 2.2% next year and then ease further, showing a positive stance on the matter.
Bowman recommends a cautious approach to interest rates Michelle Bowman, a hawkish member of the Fed, indicated that inflation remains a concern and that the labor market is strong. Therefore, she called for a cautious approach regarding further rate cuts. Recently, the Fed lowered its policy rate by a quarter point to a range of 4.50%-4.75%, and Bowman noted her preference for a gradual approach rather than rapid changes.
Bowman opposed the half-point rate cut decision made in September, suggesting that there could be pauses in progressing toward the Fed's 2% inflation target. Acknowledging that they are still far from their inflation targets, Bowman emphasized the importance of carefully monitoring the labor market and argued that cautious steps should be taken in rate reductions. She stated that the neutral policy rate is at a higher level than in previous periods and suggested that they could be closer to this level.
Collins calls for more easing Susan Collins, President of the Boston Fed, emphasized the need for further rate cuts but stated that policymakers should not move too quickly or slowly. Collins mentioned that the current policy remains somewhat restrictive, indicating the need for additional policy easing. Furthermore, she expressed that the Federal Open Market Committee is positioned to address inflation and employment risks.
Collins noted that interest rates are not following a predetermined path, highlighting the need for careful consideration of future policy changes. While acknowledging that the ultimate goal is uncertain, she mentioned that rate cut actions would depend on incoming data and emphasized the importance of a cautious approach.
ECB's 2025 inflation target Yannis Stournaras, a member of the European Central Bank Governing Council, stated that the Eurozone is on the verge of sustainably reaching its 2% inflation target and explained that further balance sheet expansion should be avoided. Serving as the Governor of the Bank of Greece, Stournaras highlighted their success in controlling inflation and stressed the importance of now targeting economic growth.
Stournaras expressed expectations that inflation would align with the target sooner than anticipated and move toward sustainable levels. He indicated that policies need to take economic conditions into greater consideration, noting that pressures for monetary expansion continue but could have delayed impacts on economic growth. The European Central Bank is expected to move towards deeper monetary easing.
BoE's clarification on uncertainties and rapid cuts Dave Ramsden, Deputy Governor of the Bank of England, stated that he could consider making faster rate cuts if uncertainties regarding the UK economy dissipate. Ramsden indicated that inflation has exceeded expectations based on official data but expressed hopes that the economy would continue to normalize with low and stable inflation trends.
Due to economic uncertainties, including the effects of the budget announced by the Labour Party government, he emphasized support for the Monetary Policy Committee's strategy of gradually lowering borrowing costs. Ramsden noted that he might consider a less gradual approach if further disinflationary pressures emerge. Valuing the importance of maintaining flexibility in monetary policy for sustainable economic growth, Ramsden stated that economic dynamics must be carefully monitored.